Rbi Likely To Check Rupee Spike

The rupee is expected to be hover around 48.65-48.75 against the greenback during the week. Dealers expect dollar inflows from foreign funds to continue during the week, but feel that the Reserve Bank of India (RBI) may buy dollars through public banks.

A dealer with a foreign bank said: "Exports are not growing impressively. Any inflow from other sources can impact the currency further. Hence, the RBI is expected to mop up dollars if the rupee rises sharply. " He said the currency is still overvalued by more than 2 per cent against the greenback.

Forex dealers feel that the central bank will hold the rupee from rising over 48.65 but will prevent it from slipping past 48.75 mark either.

Forward premiums are likely to harden during the week. Dealers feel that forward rates have already come down too much and any further fall will only be possible if the RBI announces a cut in repo rate.

A forex head of a private bank said: "Government paper yields are likely to come down during the week. But we feel that the premiums are already down and one of the reason for that was the expectation of a repo rate cut. In a situation like this rates will go up slowly till the repo rate is actually reduced. "

The spot rupee closed at 48.66/67 on Friday after opening at 48.6900/7050. The currency strengthened during the day as exporters brought in funds.

In the forward premium market, rates continued to go up. The six-month annualised premium ended the day at 6.45 per cent against its previous close of 6.35 per cent. The one-year premium closed at 6.22 per cent as against its previous close of 6.17 per cent.